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distributed energy intelligence

Quarter 2 / 2015

EDGE Finance Advisory

Distributed Energy Finance Report

Editors' Introduction: View from the EDGE

Topics in this issue: „„ How can developers strategize for YieldCo acquisitions? „„ Progress in standardization efforts for com-

Technology, financing and market innovations are disrupting the energy markets, creating massive opportunities for deployment of distributed energy projects and services. EDGE Advisory provides current market intelligence analyzing innovations at the cutting edge of distributed energy finance, along with summaries and industry expert interviews discussing federal and state policy developments impacting these markets.

mercial solar. „„ Hybrid resources and microgrids: dealing with financing challenges. „„ Where are the opportunities for real estate firms and distributed energy? „„ How are green banks emerging as sources of

Published by the Energy Finance Practice of Sullivan & Worcester, LLP Jim Wrathall & Elias Hinckley, Editors See our blog at:

finance? „„ U.S. regions poised for growth – progress in the Southeast. „„ What are the key distributed energy policy developments in Washington, D.C. and the states? „„ Our take on longer term global trends pushing the distributed energy transition.


EDGE Finance Advisory Q2 / 2015

In this issue: Page 3

How YieldCos are changing the market for developers

Page 5

Will commercial solar become more financeable?

Page 8

Financing for hybrid solutions and microgrids

Page 12

Insights on Green Bank programs: Interview with Bert Hunter, Connecticut Green Bank

Page 14

Opportunities at the intersection of energy and real estate

Page 16

Economics of combined heat and power - a real estate perspective

Page 19

Federal Roundup: Looking down the road with 38 North Solutions Interview with Katherine Hamilton and Jeffrey Cramer

Page 22

Global trends in the distributed energy transition

Page 24

Regional focus: Green Tea Coalition supports renewables inroads in the Southeast

Page 25

Report from the States

Published in conjunction with the World Alliance for Decentralized Energy

Content provided by Sullivan & Worcester LLP


HOW YIELDCOS ARE CHANGING THE MARKET FOR DEVELOPERS In the first half of 2015, YieldCos have continued to proliferate, with the structure taking on an increasingly important role in providing capital for distributed generation projects and businesses. Though the market has not coalesced around a single definition, a

Why does this matter? Under the “old� model of renewable

YieldCo can loosely be defined as a publicly traded company that

energy investment, deal teams had to cobble together various

holds energy assets and has the goal of providing investors with

counterparties to take advantage of all of the economics of a

a steady dividend yield. YieldCos are typically organized as af-

deal. These private market transactions were more or less be-

filiates of entities which have asset portfolios on their books that

spoke, resulting in high diligence and service costs and requir-

they wish to monetize, such as utilities and large-scale residen-

ing substantial returns to offset project-specific risks. It was

tial solar developers, and which are positioned to actively pursue

not uncommon to see deals fail to receive financing even when

project development and acquisitions feeding YieldCo growth go-

internal rate of return calculations predicted double digit yields,

ing forward. The ongoing affiliation assists in promoting manage-

particularly where one-off projects involved high or uncertain

ment continuity and ensuring that the YieldCo affiliate will have a

risk profiles and transaction costs.

steady stream of future project assets. With the rapid growth of existing YieldCos and numerous additional entrants coming into

The YieldCo model has changed that. By aggregating mul-

the market, it is becoming more important for upstream partici-

tiple projects, risks are spread and overall returns are more

pants to appreciate the implications of the YieldCo structure. In

certain and predictable. Transaction costs are lowered over-

this article we explore considerations and strategies for develop-

all through standardized approaches to deal processes and

ers seeking to feed into the YieldCo pipeline.

documentation. As a result, YieldCos have created efficient homes for the assets large companies formerly kept on their

There are at least eleven entities meeting this definition cur-

balance sheets, allowed nascent entities to raise capital for ac-

rently traded on the public markets in North America: NextEra

quisitions, and reduced the cost of capital in the marketplace.

Energy Partners (NEP), Brookfield Renewable Energy Partners

Further, YieldCos match up the time horizons of investments and

(BEP), Hannon Armstrong (though formed as a REIT for tax pur-

returns in clean energy projects, providing cash dividends consis-

poses) (HASI) (all traded on the NYSE); Pattern Energy Group

tent with the desires of income investors.

(PEGI), Abengoa Yield (ABY), NRG Yield (NYLD), TerraForm Power, Inc. (TERP) (all traded on the NASD); TransAlta Renewables (RNW), Capstone Infrastructure Corporation (CSE.TO), Innergex Renewable Energy (INE.TO) and Primary Energy Recycling (PRI.TO) (all traded on the TSX). Of these, a quick search reveals that most are trading at +/- 1% of a 5% dividend yield, though that is not a hard and fast range. In June, 8point3 Energy Partners, a new YieldCo formed through a partnership between First Solar and SunPower, completed its IPO, raising $420 million. As a practical matter, those involved in renewable energy are excited about YieldCos because they reduce the cost of capital required to acquire renewable energy assets. At the risk of oversimplifying a bit, this is due to two factors: 1) the addition of liquidity to the market; and 2) a reduction in return expectations due to the types of investors which are creating that liquidity.


EDGE Finance Advisory Q2 / 2015

In the midst of what is certain to be a complicated few years in

pushed for standardization of documents and risk analysis, many

solar as the market looks past the potential expiration of federal

projects are plagued by “deal killers,” ranging from missing terms

investment tax credits in 2016, developers would do well to culti-

to default provisions that don’t align with the expectations of so-

vate sales pipelines that feed into best-in-class YieldCo partners.

phisticated counterparties, which could be remedied by utilizing

There are several steps that developers can take to make sure

available resources. Increasing numbers of developers are using

they are strategically aligning their projects with the desires of

standard documents. Others seek guidance from counsel to en-

potential YieldCo partners.

sure their document suites are market-ready. Still others utilize documents provided by entities they wish to sell to, though this

First, deals need to be priced to the market. If a developer wants

requires collaboration.

to sell off assets, either individually or as a portfolio, they need to be priced correctly. This is easier said than done. Particularly in a

Developers can also take steps to ensure that key aspects of their

world where publicly-disclosed power purchase agreement rates

deals have been finalized before presenting them to potential

seem to be priced to the bottom, RFP winners have increasingly

partners. Far too often, developers present projects to the mar-

thin margins priced into bids, and declining state and utility incen-

ket as “shovel-ready” when necessary permits have not been

tives are the norm. While some have found it difficult to adjust,

received and documents are still under negotiation. While some

developers have started taking notice of these new realities, and

finance partners have an appetite to collaborate with develop-

are operating accordingly. Price compression, a natural event in

ers before the shovel-ready phase, including by providing at-risk

the maturation of a market, seems to be occurring in solar.

development capital, it is critical that developers are honest and clear about the key deliverables that need to be obtained and

Even with attractive pricing, YieldCos, and their parent entities,

pressure points that could arise.

are selective when undertaking acquisitions. This is not surprising given the high volume of deals they transact, the sophistica-

Given the proliferation in YieldCos and their expanding role in

tion of their deal teams and the stringent requirements of their

the market, distributed generation project developers will be

partners. Developers can take steps to ensure that they are ready

increasingly reliant on YieldCo acquisitions in supporting asset

for their interactions with YieldCo counterparties. Addressing

turnover. Developers and aggregators in the smaller and mid-

these problems early in the development cycle is critical if devel-

size distributed markets will benefit by anticipating and meeting

opers wish to engage quality partners.

YieldCo parameters, through early collaboration and by obtaining guidance on the relevant market and documentation factors.

Developers also must ensure that their documentation conforms

In the event that the 30% ITC is not extended by Congress, these

to market expectations. While a number of solar industry-driven

considerations will become even more important as deal activity

initiatives, including SAPC (discussed below) and truSolar, have

is expected to pick up through 2016.


WILL COMMERCIAL SOLAR BECOME MORE FINANCEABLE? While solar has been exploding over the past few years, the small commercial segment of the market including installations at apartment and office buildings, small businesses, factories, warehouses, and hospitals - has been slow to develop. The residential solar market, built on standardized transactions

power buyers has kept traditional (and inexpensive) capital

and easy access to financing supported by FICO scores, is red

sources away from this part of the market. The result is a small

hot, as large investors with cheap capital are attracted to homog-

and fractured segment that has been underserved while the bal-

enous amassed projects and the perception of well-understood

ance of the industry has grown rapidly.

credit risk. The utility scale solar market also continues to grow (despite fewer available long-term power purchase agreements)

However, the challenges for small commercial solar are slowly

on the strength of declining costs and abundant liquidity in the

being tackled. Better transaction processes and models for

form of low cost capital driven significantly by YieldCos.

standardization are emerging, along with new tools such as revitalized PACE (Property Assessed Clean Energy) programs

The small commercial market involves transactions that can be

and innovative approaches to managing credit risk. Margins in

as complex and expensive to execute as large projects, but lack

commercial solar are currently higher than in either utility scale

the economic scale to absorb the associated transaction costs.

projects or residential pools. This confluence of opportunity

Standardization, which has brought down costs for residential

and solutions is redrawing the commercial market and attract-

pools, has been slow to emerge in parallel form to support the

ing new and cheaper capital. Commercial is poised to become

small commercial market. Unrated or high credit risk of diverse

the new hot solar market.

The importance of standardization Standardization and streamlined transaction processes are vi-

with the goal of helping refine these standardization efforts to

tal to the commercial market. Limited success in this segment

meet the requirements of the financing industry for direct in-

has thus far mostly been with large corporations, which would

vestment, as well as access to secondary market options like

negotiate standard agreements across many sites. For others,

securitization. In the commercial area, there has been interest

legal and transaction structuring fees have crippled the eco-

and evolution built off both these efforts. While the output has

nomics of many commercial-scale projects. Standardization is

not yet attained the uniformity of products in the residential so-

critical for accessing cheap financing sources, as large investors

lar market, much progress is being made.

have little appetite for small one-off projects, and consistency of project and supporting documentation is necessary to aggregate multiple projects into appealing pools for these investors. Two years ago, the U.S. National Renewable Laboratory (NREL) assembled the Solar Access to Public Capital (SAPC) coalition, brought together to build model transaction documents to promote standardization. SAPC developed a set of model contracts for solar projects, including power purchase agreements (PPAs) and lease agreements for third-party ownership. The Solar Energy Finance Association (SEFA) was later formed,


EDGE Finance Advisory Q2 / 2015

At the same time, companies active in the small commercial

negotiations, allowing for the development of processes and

market are aggressively working towards consistency in docu-

documents that are easily explained and modified – and a few

mentation and process on the limited deals that they have been

lawyers (and some competing services) have even begun to take

able to execute. One challenge to standardization is the poten-

responsibility for owning this part of the process and are provid-

tial misalignment of interests of the solar provider, the build-

ing certainty for both the cost and the production of consistent

ing owner and service providers such as lawyers. In residential

project documentation.

markets documentation is simple and offered on a take-it-orleave-it basis. By contrast, commercial building and business

Collectively, these developments are moving towards real stan-

owners view a solar offer as a negotiation around terms of proj-

dardization across portfolios of commercial projects. As we have

ect documents, typically negotiated by lawyers from both sides.

seen with residential, this success in standardizing the process

The lawyers negotiating on behalf of the solar buyer may not be

and documentation will act as a positive feedback loop for the in-

well versed in solar projects (and often both sides’ legal support

dustry – as more projects are brought on line, the ability to stan-

is focused on risk management as an absolute concept and not

dardize, and to demand more standardization with potential solar

on the materiality of the solar commitment). This void too is

buyers, will naturally increase. The result will be an accelerating

being filled. Efficiency in the solar market is broadly improving

reduction in the transaction costs in this segment of the market,

through an understanding in the common tension points within

driving an expanding pool of potential new investors and lenders.

Solving the creditworthiness conundrum Commercial transactions also face greater complexity in assess-

tion technology companies are also moving to serve this need.

ing credit risks. There is a great need in the solar market for a pro-

In many states, PACE funding allows customers to finance a

vider of FICO-like “shadow credit ratings” reducing the time and

solar system and pay for it as an addition to their property tax

expense of assessing these risks. Defining credit risk, especially in

bill. PACE solves the creditworthiness problem by tying the

a way that more conservative investors (like banks and other tax

repayment of the solar to property tax, making it much more

equity investors) will accept, has been a consistent challenge for

likely to be repaid than if structured as a separate financing

the commercial solar market. But this too is changing.

for just the solar property. PACE captured the imagination of the solar industry several years ago. However, Fannie Mae

A new credit measuring tool has been launched by Sparkfund,

and Freddie Mac, followed by other mortgage underwriters,

a Washington, D.C. startup, which has developed software ap-

refused to allow PACE liens to have priority over mortgages

plications for building condensed credit scores for small com-

on the associated properties and the concept lay dormant

mercial customers.

Sparkfund’s program was designed for

for several years. Of late, however, a number of states have

the energy efficiency market, but can also be applied to solar

become much more comfortable with PACE, especially in

financing. This alternative credit review is aimed at building

commercial settings, and it is has become a valuable tool for

aggregated pools of credit risk for developers to support debt

entities that do not have a FICO-like score or a large balance

and equity capital investments. Other database and informa-

sheet of assets.

Innovative approaches bring new sources of money As the commercial space begins to benefit from standardization

Institutions which previously have financed projects are in-

and better credit management tools, new sources of capital are

creasingly willing to expand on existing relationships to provide

being attracted to this segment of the market. Companies are

financing for additional commercial solar projects.

seeing a new influx of community banks and credit unions starting to fill the void for both lending and tax equity for small com-

This engagement by local financial institutions appears to be

mercial projects. Local financial institutions can lean on long-

part of a larger trend. Bank of America and SolarCity are work-

standing relationships with the small commercial businesses.

ing to facilitate smaller and community banks to enter the mar-


ket by establishing a $200 million program that allows these

processes for standardization, innovative financing tools, and

banks to participate in tax equity pools. This relationship

a wave of new investors are on the verge of opening up this

between Bank of America and the smaller investors is facili-

huge new market. Because small commercial has been rela-

tated by projects fitting inside a standardized framework and

tively untapped, the available returns for the companies and

leveraging local financial institution knowledge of the solar

investors that can realize will be higher than in the more es-

customer’s credit worthiness. Others are exploring financing

tablished solar segments, with further potential returns open

platforms for the small commercial solar market both as direct

to those who can crack open the secondary markets. This will

investors and also with the strategy of aggregating projects

have ripple effects throughout the distributed energy and en-

and selling into the secondary markets.

ergy efficiency marketplace as the lessons of how to streamline and standardize small commercial projects are exported

Smaller commercial solar has tremendous potential. Improved

Achieving success in distributed energy projects requires more than an innovative financial model. Transaction efficiencies are a key determinant of success. Regulatory and transaction costs for lawyers, bankers and accountants can make or break a project, or even a business model.

to parallel markets.

Transaction processes should be carefully tailored to match the economics of distributed energy projects and investments. For more information on innovative approaches to achieving transaction efficiencies, please visit:


EDGE Finance Advisory Q2 / 2015

Financing For Hybrid Solutions And Microgrids Hybrid solutions – combinations of multiple generating and power management technologies – are creating new value propositions beyond single technology systems. A form of hybrid, the concept of a mi-

system. Microgrids frequently have the

2015 to date has seen major advance-

crogrid generally refers to an electric

ability to “island,” by automatically dis-

ments in deployment of hybrid distrib-

grid within the larger utility system that

connecting themselves from the larger

uted energy resources and microgrids,

interconnects multiple power users with

grid during system emergencies while

along with accompanying innovation in

each other and with local power gen-

maintaining reliability within the mi-

financing for these solutions.

erators and/or storage in an integrated

crogrid area.

milestones have included:


„„ SolarCity’s offering of “microgrids as a service” – combining solar generation, inverters, Tesla lithium-ion battery storage and power management software into an integrated solution, supported by zero-payment financing and ongoing operations and maintenance. „„ SunEdison, in March, expanding its third-party financing options for battery and inverter systems co-located with solar projects; SunEdison and Imergy also announced an offering combining solar and flow batteries to provide microgrid solutions in developing countries, starting with a goal of serving 20 million people in India. „„ ViZn Energy joined with LFC Capital to finance solar PV and energy storage for commercial and industrial participants, reportedly providing up to $5 million in funding through an operating lease model to finance installation of solar and flow battery systems. „„ Green Charge Networks has deployed a model whereby it will fully finance installation of energy storage and power management systems to reduce peak load and provide backup power, with payment out of shared utility fee reductions over the first decade. „„ Sunverge Energy announced deployment of its Solar Integration System, an integrated energy storage platform which combines solar inputs, power electronics, lithium-ion storage battery storage, and cloud-based software controls and analytics. „„ Stem, a company that finances distributed energy storage systems for commercial industrial customers, has raised more than $60 million in equity capital to date, including a $12 million round led by Mitsui & Co. in April. „„ Texas utility Oncor has teamed with S&C Electric and Schneider Electric to engineer a “smart microgrid” solution combining solar, wind, storage and diesel backup

Institutional investors are committing substantial financing for

partnering with developer Energizing Co. for investment in util-

these kinds of projects. For example, Stonepeak Partners Infra-

ity distribution microgrids of up to 145 MW. Another financial

structure Investors, a $1.7 billion private equity firm, announced

participant is Clean Fleet Investors, a fund focusing on project

a $250 million fund to finance microgrid projects. The fund is

financing transactions ranging from $3 to $10 million, which is


actively seeking storage and microgrid investment opportunities.

Expanding sources of financing will be critically important to

States are getting into the action as well. New York’s Green

maintaining growth in this emerging sector. But hybrid dis-

Bank is expecting to provide over $800 million in funding for

tributed generation and microgrid projects raise unique opera-

clean energy projects through 2018, focusing particularly on

tional, technology and regulatory issues that must be carefully

microgrid and high resilience projects. Connecticut's Green

assessed in evaluating and structuring financing. The ability of

Bank has a specific microgrid grant program, with $30 million

the financial markets to understand, accept and properly price

in grant funding authorized through 2016. California’s state law

these factors will impact the pace and breadth of deployment

AB 327 has required major utilities to prepare proposals for

of these technologies.

integrating customer-sited generation, including microgrids, through advanced distribution grid planning.


EDGE Finance Advisory Q2 / 2015

Gating factors to financing microgrid and hybrid energy projects Financial investors focus on several key gating and due diligence items in evaluating microgrid and hybrid projects. Major considerations include:

Resource evaluation and costs. Fundamental considerations affecting performance and economic returns are similar to standard renewable energy projects such as solar and wind, but are made more complex by the additional interplay of information and cybersecurity technologies, added technology risk, and the regulatory overlay for transmission and distribution facilities.

Power control technology assessment. Commercially proven hardware and software for load management and control are vital to financing. As microgrids represent new points of entry to the grid, integration of cybersecurity software into systems will enhance the value of the asset to the grid, and indeed may become compulsory in some jurisdictions. The more robust the software is in controlling capacity and responding to demand signals from dispatch centers, the better the prospects for financing.

Portfolio aggregation. Aggregating hybrid and microgrid assets provides operating economies of scale and mitigates single contingency outage risk, both of which are attractive to investors and lenders. Standardized technology solutions can be installed in a single location for deployment on multiple projects. Aggregation of assets also allows a developer to more quickly tap into the YieldCo market to monetize value, and to achieve cost savings through technology replication and document standardization

Valuation of grid services. Microgrids can provide substantial benefits back to the grid, in the form of peak demand management, ancillary services such as voltage regulation, reactive power and frequency response, and deferred capital investment in distribution and infrastructure costs. Are these services fairly valued (or valued at all) in the applicable utility/PSC setting? As grid management is a core service of most regulated utilities, an opportunity exists to develop hybrid investment structures in partnership with the incumbent utility. Innovative financing solutions can be used to permit these assets ultimately to reside in a utility’s “rate base� but without imposing rate shock on ratepayers which can be the single largest regulatory impediment to utilities building out needed infrastructure.

Valuation of grid resilience and security functions. Does the financing framework attempt to quantify the value of greater reliability and protection against disruptions? A key metric for valuation and rate negotiations is how the same asset would fare if granted an incentive or performance-based rate of return if it were to be built by a regulated utility.


Importance of regulatory and jurisdictional issues Microgrids present complex regulatory issues, as they involve

areas, provisions that could be asserted to bar third party op-

the erection of wires, substations, conduits and other facilities

eration of hybrid and microgrid systems.

that require rights of way, easements and interconnection to the larger grid. Unlike utilities, private microgrid owners do not

The California Public Utility Commission (CPUC) has released

enjoy the powers of eminent domain. Nor can they “rate base”

a white paper, Microgrids: A Regulatory Perspective, 2 discussing

their investments like utilities. Microgrids should be incor-

many of the important regulatory issues, including:

porated in a manner to avoid redundancies and overlaps with utility planning and facilities. Other obstacles include lack of an

„„ Relationship with the incumbent utility

existing regulatory framework, unclear safety standards, utility

„„ Interconnection rules

opposition and permitting delays. With respect to utility oppo-

„„ Retail tariffs and bundling

sition, three factors can be particularly problematic: (1) exces-

„„ Standby charges

sive fixed and stand-by charges; (2) interconnection barriers;

„„ Departing load charges

and (3) restrictions on rights to sell back to the grid.

„„ Approaches to metering „„ Utility cost recovery

Potential federal, state and public utility commission require-

„„ Sitting and grid backup

ments must be carefully evaluated. If a microgrid is intended to distribute to multiple end-users, a project may fall within the

The CPUC paper and similar resources, along with professional

definition of a “public utility” or otherwise be a regulated en-

consultation, can help market participants identify and evaluate

tity under state law, triggering PSC jurisdiction and statutory

the suite of regulatory risks at the state level. Federal require-

constraints, potentially including restrictions prohibiting retail

ments also must be evaluated, particularly if a microgrid intends

electricity sales. Many states provide electric utilities with the

to transmit at a transmission level voltage (e.g., 69kV or higher)

exclusive right to provide retail electric services in their service

or sell electricity into the wholesale power market.

Transaction structures and costs Financing frameworks for hybrid distributed energy and microgrid projects present unique considerations and may require time to gain acceptance by money center banks and other financial institutions. Leasing, shared savings, and portfolio models can borrow from existing approaches used for single-technology solar and wind transactions. Developers and investors looking at particular states or projects also should seek to identify existing programs seeking to develop standard rules and procedures for addressing the regulatory issues above. To the extent such efforts are in process, there may be opportunities to shape the standards and ultimately to optimize prospects. The market for hybrid and microgrid development and investments remains in its infancy. For those who are able to manage the risks described above, substantial opportunities await.



EDGE Finance Advisory Q2 / 2015

INSIGHTS ON GREEN BANK PROGRAMS: Interview with Bert Hunter Executive Vice President and Chief Investment Officer, Connecticut Green Bank “Green banks” – financial institutions chartered with an

bined heat and power, fuel cells and renewables, in addition

express mission of funding clean energy and distributed en-

to energy efficiency measures, through mechanisms such as

ergy projects – have been established in a number of states,

subordinated and revolving loans, loan guarantees and ag-

including Connecticut, New York, New Jersey, California,

gregation facilities. We asked Bert Hunter, Chief Investment

Hawaii and Maryland. These special purpose banks provide

Officer of the Connecticut Green Bank, to fill us in on the lat-

financing for distributed energy resources, including com-

est developments:

EDGE: The Connecticut Green Bank has

es for electricity. We have the highest

solar with energy efficiency at the same

been having a major impact providing fi-

electricity prices of the lower 48 states

time -- if a homeowner does that under

nancing for clean energy in Connecticut.

in fact. At the same time we have a gov-

a current program we’ve got going with

What role do you see the Bank playing, and

ernor and a legislature that have estab-

these local lenders, they’ll lend at less

which of your current financing programs

lished very ambitious clean energy goals.

than 3% for 10 years.

are having the most impact?

When we speak of clean energy here in Connecticut, we think in broad terms.

In another initiative, we created the first

BH: At the Green Bank we see our role

We’re focused on renewable energy

dedicated solar loan product, not se-

as maximizing the impact of state re-

technology, especially solar PV, but also

cured with a lien on the home or tied to a


technologies such as fuel cells.

particular solar panel product: a 15-year

Our funding comes mainly

from electric utility customers (a sys-

6½% loan product, financed by crowd

tems benefits charge of about $8 per

Where are we having the most impact? I

funding. Working with US Bank provid-

household per year), so we refer to it as

would really say in three key areas. One

ing tax equity and a syndicate of banks

limited rate payer resources. We seek to

is residential energy efficiency, another

led by First Niagara, we put together a

use those limited rate payer resources to

is residential solar PV, and the third is

$60 million dollar solar PV fund for resi-

leverage private capital, to grow clean

in the commercial/business sector, our

dential as well as commercial scale solar.

energy markets quickly. The goal is to

commercial PACE, or “C-PACE”, program,

The real innovation there was creating a

boost private sector investment in clean

which provides funding for energy ef-

facility for smaller commercial transac-

energy, creating a suite of benefits in-

ficiency, solar and renewable energy

tions. We worked with US Bank and the

cluding job creation, economic develop-

projects for commercial and industrial

lenders to develop an underwriting box,

ment, climate benefits, and affordable


if you will, to permit the Green Bank to

energy prices for consumers, or at least

underwrite these credits, and they pret-

to lower their expenditures to the extent

We have a $30 million dollar program

ty much broke into the two categories,

that they become more energy efficient.

with 10 community banks and credit

including a host with and without credit

Our goal is to meet these objectives in a

unions to provide unsecured loans to

ratings. The projects without a credit

way that is sustainable, through financ-

homeowners at affordable rates of up to

rating get secured by C-PACE. The Con-

ing programs as opposed to handing out

12 years to finance energy efficiency, so-

necticut Green Bank was the first to do

rebates and incentives, so the capital

lar PV and a range of other energy saving


comes back to the Green Bank where we

measures. Typically the rates for these

can redeploy those resources over time.

loans range from 4¼% for a five-year

Also, our C-PACE program has been very

loan, to 6.99% for a 12-year loan, which

successful. The program works by pro-

One reason we were established is that

are great rates for an unsecured loan.

viding up to 100% financing for terms

Connecticut is challenged with high pric-

But it even gets even better if you bundle

of up to 20 years for energy efficiency


and renewable energy investment to the

We also have a very rapid response to

EDGE: Looking forward, are there addition-

property secured by putting a benefit as-

applications. Property owners as well

al innovations, or new structures or other

sessment lien on the property. For prop-

as the contractors know that if they go

approaches that are on the horizon for the

erty owners, it doesn’t matter whether

through this process the money is going


they’re going to be there for three years

to be there and they don’t have to wait.

or twenty years, because when they sell

The Green Bank is going to start cutting

BH: Yes. To stick with the C-PACE theme

the property, the obligation to repay the

checks and fund the project. Projects

for the moment, the market in a short

financing for the energy efficiency and

in other states sometimes have to wait

time period has outgrown the ability of

renewable energy measures that are

weeks for enough projects to be aggre-

our balance sheet to keep up, so we have

fixed to the property will become the ob-

gated before the C-PACE district will

requested proposals from the capital

ligation of the next property owner. The

then issue a bond and then provide the

market for facilities to fund the C-PACE

savings stay with the property and so

financing for the property to apply it to

program. We were showered with pro-

does the obligation to pay. We’ve done

the program.

posals, thankfully, from many banks, in-

$75 million dollars in transactions in 18

vestment banks, broker dealers and the

months at over 100 different properties

EDGE: Are there examples in other states

like, offering anywhere from $100 mil-

throughout the state. We are known for

that you see are following the lead, doing

lion to $200 million and more in funding

this as the fastest growing and largest

things that you see making good progress in

for these transactions including some

commercial PACE program in the coun-

this area?

securitization facilities. We are in the


process of closing the transaction with BH: California has a number of state-

the successful bidder. Stay tuned for

EDGE: Is there some obstacle that other

wide programs similar to ours. Also,

that. We also are in the process of issu-

states are seeing to commercial PACE that

New York has the Energy Improvement

ing green bonds to finance energy effi-

needs to be overcome to make this more

Corporation (EIC) that they have estab-

ciency improvements for state facilities.


lished, although I believe that is not an

Everything from state hospitals, cor-

open platform. Our platform is open,

rectional facilities, Department of Mo-

BH: It comes down to how the PACE

so not only does the Green Bank lend,

tor Vehicles or DMV buildings, agency

programs are structured, and whether

but we also have what is called a stan-

buildings; all of these are looking to do

transactions can be done with a straight-

dard offer that we make available to

energy efficiency improvements or so-

forward application process and docu-

capital providers if other lenders want

lar PV. We are going to start with a $40

mentation process. We worked on that

to come into the market and do C-PACE

or $50 million green bond and then we

very, very hard with potential lend-

financing. In the New York EIC model

will issue more as the program develops.

ers and capital providers. We put the

I am pretty sure they control the fund-

program together in a way that is very

ing mechanism through First Niagara

I would say that there is an entire eco-

friendly to property owners and easy

and Bank of America. I see other states

system of energy efficiency and renew-

to understand. We try to take the pain

moving along.

able energy providers that are benefit-

out by making it a very routine, simple

establish a statewide program.


ing under this program. And not only

and easy process.

Uniformity across

Jersey and Massachusetts are looking

are homeowners benefiting, but also

the state is also important. Contractors

to enact legislation. Rhode Island has

businesses. We’ve seen the growth of

love it because they know once they’ve

established an infrastructure bank, and

solar PV double year-by-year. In a state

got the routine down for financing, they

there we have talked to them because

like Connecticut, which suffered greatly

can go anywhere in our state and finance

they want to establish a C-PACE pro-

from the financial crisis, this has been

using C-PACE. In some states, you move

gram. So it is very popular, but I would

an important boost to the economy and

from county to county, or even from,

say that the states that are leading the

jobs, supported by Green Bank financ-

from one taxing district to the next, and

way right now are California, Connecti-

ing and the private capital that comes

you can have totally different documen-

cut and New York, as well as Florida.

with it.

tation, totally different rules. That’s not

Those are the four main states where

a way to scale-up a market.

commercial PACE activity is alive.

Maryland is trying to


EDGE Finance Advisory Q2 / 2015

Opportunities at the Intersection of Energy and Real Estate A wave of technology and innovation is fundamentally changing the way that building owners and other real estate investors are thinking about the role of electricity in real estate investments.

Since early in the 20th century, the

es, where a tenant is responsible for ener-

technologies and new ideas around pro-

world’s electric systems have been based

gy costs). As that model is being replaced,

cess on a time scale measured in months.

on a model centered on large generating

the increasingly distributed energy system

stations, with complex transmission and

is creating tremendous opportunities to

New energy companies are emerging.

distribution systems to deliver electrici-

profit from this multi-trillion-dollar energy

The current environment, with persis-

ty to users. Now we are in the early stag-

market transformation.

tently low interest rates, has made the

es of a fundamental shift, driven by tril-

use of money extraordinarily inexpen-

lions of dollars of investment, from the

However, who will own these assets and

sive, and investors have been willing to

traditional centralized energy model to

how the profits will be allocated are is-

enter parts of these new energy markets



at a scale and pace that has surprised

far from settled


many as they search for new sources of

in these newly

yield. The result has been several early


success stories among these new energy




Residential rooftop solar

has been the most notable early success. Traditional ener-

Deals are easily replicated with take-it-

gy companies are

or-leave-it approaches to documents.

only just begin-

Credit risk is pooled based on FICO

ning to embrace

scores, just like mortgages, and the re-

the economic po-

sult is a market that can not only attract

a system that is significantly distributed.

tential of this shift – and will continue

capital, but one where investments have

This investment will manifest in several

to struggle to adapt, for a few reasons.

successfully driven public stock offerings

distinct forms, including onsite power

Utilities are subject to regulatory limits

or have been re-sold into the second-

generation such as solar or combined

on owning generation or energy manage-

ary market, further reducing the cost of

heat and power systems; enhanced en-

ment tools inside a building and beyond

money supporting these projects.

ergy efficiency and energy management

the meter where the sale of electricity

tools; and on-site electricity storage; as

occurs. Utilities have been slow to em-

One area where these new energy-fo-

well as systems built around supporting

brace a market that represents demand

cused investors have struggled to find

electrification of vehicles.

destruction for their core product and

success so far is in the market for energy

does not build off of core skills within

projects associated with commercial and

In the old model, electricity came in from

these companies.

Finally, the culture

industrial buildings. Finding consistently

the wires and was a cost over which a build-

of the traditional power business is one

credit worthy owners and tenants, along

ing owner had either no control (in settings

built on glacial-like response to change,

with the complexity and expense of the

like self-used and gross leased property,

in which advancements (if they occur)

transactions, have presented the biggest

where electricity might be paid by a build-

take decades to unfold, making it very

challenges. There have been some lim-

ing owner and recovered through higher

difficult to react to what is now a tech-

ited success stories working with very

rents) or no real interest (as with net leas-

nology driven market, producing new

large companies (where multiple sites


can be managed under a single transac-

energy investments are remarkably simi-

operating costs, augmenting cash flows,

tion process and credit ratings make

lar to the underlying real estate invest-

and improving a tenant’s ability to pay

evaluating credit risk easy), but across

ments that they serve. There are certain

for property use.

much of the commercial real estate mar-

identifiable operational risks, but once

ket we have seen limited activity, despite

these are controlled, the payment risk

These investments require a better un-

the potential for very significant invest-

is a combination of occupancy and ten-

derstanding of the relationship between

ment returns.

ant credit risk – exactly what a building

building use and energy than has been

owner already models to determine the

necessary for most real estate investors

In the past year new groups of investors

value of the underlying real estate in-

to date. They also require careful struc-

have begun exploring this untapped part

vestment. The energy investment can

turing for potential investors organized

of the market. Some real estate inves-

actually enhance the value of the under-

as real estate investment trusts, or other

tors have recognized that these new

lying real estate by reducing occupant

sophisticated organizational structures and property management approaches. Otherwise, the most significant difference is that these energy investments can generate substantially higher rates of return than the underlying real estate investment. For a real estate investor who has already evaluated a property, layering on an energy investment to increase returns has obvious appeal. An investor that is already comfortable making the real estate investment understands the loss, default, and occupancy risks of a property, so adding a further layer of additional investment return analysis becomes a relatively easier proposition. The emergence of this new type of real estate-energy investor has broader significance. The need for investment to support the energy transition that has just begun is immense – it is expected to entail the largest deployment of capital in human history, so there is ample room for new participants, especially investors that are addressing underserved portions of the market. By applying a more sophisticated understanding of real estate-related risk to the distributed energy market, these new investors will rapidly and dramatically expand the available capital for distributed energy investments. With this expansion expect a new class of energy companies and investors to become a vital part of our energy mix.


EDGE Finance Advisory Q2 / 2015

ECONOMICS OF COMBINED HEAT AND POWER: A Real Estate Perspective With states adopting programs to encourage energy users to

thermal requirements are high, (2) its boilers are aging, (3) elec-

install combined heating and power (CHP) systems, building

tricity prices are greater than $0.10/kWh, or (4) major boiler

owners and asset managers are asking themselves the bottom

retrofits are needed to satisfy new environmental regulations.

line question - how can CHP increase my operating income and

Typically natural gas fueled CHP systems can achieve system ef-

asset value?

ficiencies of around 80%, depending on steam load.

Every building varies in energy use, energy efficiency and fuel

To understand the economics of CHP, assume a commercial

supply arrangement. Large users such as hospitals, universities,

building with 500,000 square feet charging rent to its tenants at

hotels, offices and residential buildings each have unique con-

$50/sq. ft., inclusive of energy. We assume delivered natural gas

siderations. CHP presents an integrated alternative to (a) using

at $11.00 mmBtu ($5.50 commodity), and electricity purchases

on-site oil or gas boilers for heating while (b) purchasing elec-

from the local utility at $0.20/kwh.

tricity from the local utility. CHP generally provides a cost effective way for a building to generate its own electricity, heating

Using the assumptions set forth in Table 1, the building will

and cooling by sequentially running a single fuel input through a

spend approximately $3 million annually in energy expenses,

combined power and heating system. CHP can increase a build-

and have an annual net operating income of approximately $16

ing’s operating income, and in turn increase its asset valuation.

million. If the building’s revenue increases by 6% per year, the

CHP will make the most economic sense when (1) a building’s

asset would be valued at approximately $271 million.

„„ Table 1: Assumptions3

Building w/o CHP

Building w/ CHP

Square Feet



Annual Energy Usage per Sq. Ft.

25 kWh/ 150 btu

25 kWh/ 150 btu

Electricity Cost per kWh


Annual Electricity Cost


Annual Heating/Cooling Cost



Annual Energy Savings



Net Operating Income



Annual Increase (decrease) in NOI



NOI Increase over Life of System Asset Value@6%

$12,468,750 $270,833,333

Property Value Increase

$284,687,500 $13,854,167

Actual savings will be determined based on the actual consumption and load patterns of the building, what it actually pays for its electricity and gas or steam, how energy


efficient the building is, the availability of natural gas to the building and other site-specific factors.


By installing a CHP system, the building will begin to generate

of CHP are: 1) the grid price of electricity; 2) the efficiency

its own electricity while using the waste heat from electricity

of the CHP unit (expressed as a “heat rate” in mmBtu/kwh),

production to meet its thermal demands (heating, domestic

and 3) the price of fuel. This relationship is shown in Table

hot water and potential absorptive cooling). The higher the

1. Based on our usage assumptions, by installing CHP the

building’s thermal requirements, the more cost effective CHP

building would increase its net cash flow by approximately

will be as the cost of electricity per mmBtu of fuel declines.

$830,000 annually. This in turn will increase the asset val-

The corollary is that the cost difference between buying elec-

ue by approximately $14 million. The CHP system payback

tricity and generating it on-site increases, thereby reducing

would be approximately 7 years, based solely on energy sav-

utility expenses and increasing operating income.

ings without considering incentives or tax credits, compared to the cost of installing new boilers, which would be approxi-

The key economic relationships determining the profitability

mately 10 years.


EDGE Finance Advisory Q2 / 2015

Given the financial attractiveness of us-

tunity cost for alternative investments.

with a third party developer who will

ing CHP, there remains the question of

Building owners also get deterred by the

agree to design, build, finance, own or

whether it makes business sense to incur

uncertain risks and costs associated with

lease, and operate the system for a speci-

the higher costs to install CHP rather

power production and performance.

fied term. The building owner will then

than replacing or retrofitting the system

These risks, along with the necessity of

acquire the asset at the end of the term

boilers. Most building owners want to

deploying the incremental capital costs

at an agreed-upon price.

avoid making major capital improve-

of CHP, can be avoided by entering into

ments as they represent a lost oppor-

an Energy Services Agreement (ESA)

A third party project finance arrangement typically encompasses the following: „„ Developer agrees to design, engineer, permit, finance, build, own (or lease) and operate the CHP system for a specified term. The developer takes on the risk of construction cost overruns, delays, forced outages and system performance. „„ Developer and owner agree on a price at which electricity and heating/cooling will be sold to the building. Operating and maintenance services are often included in the price. The price will be negotiated at a discount or provide a guaranteed savings to the annual energy costs (heating/cooling, fuel and electricity) the building otherwise would expend. The contract would include penalties for non- or underperformance by the system. „„ The developer takes on the financing obligations, which is done on an “off-balance sheet” basis to the building. The developer also provides insurance to cover construction and performance risks. Energy payments made to the developer begin only once the CHP system is in commercial operation.

In addition to increasing net operat-

able long-term operating budget and

areas subject to frequent utility outages

ing income using the above off-balance

increases its energy security. The incre-

(e.g., Hurricanes Katrina and Sandy), can-

sheet arrangement, the building owner

mental value associated with mitigating

not be over-estimated.

or asset manager obtains a predict-

or avoiding power supply disruption in

A third party ownership and operation arrangement also can provide the building owner with the following additional benefits: „„ Decreased property, casualty, and disaster recovery insurance costs „„ Increased balance sheet and debt capacity „„ LEED points for up to 50% energy cost reduction over baseline „„ More competitive rental space due to reduced tenant costs „„ Increased building sustainability and reduced carbon footprint „„ Potential additional operating revenues by selling demand response and other energy products into the regional power pool

Special thanks to Craig Gontkovic, CEO of Grid Energy Services, LLC., for his contribution to this article. GES advises companies on integrating distributed energy systems into buildings on a turn-key, off-balance sheet basis. email:; 917-273-2360


Federal Report Interview with 38 North Solutions Major federal energy legislation is under serious consideration for the first time in more than five years. At the same time, federal clean energy tax credits are poised to expire, with slim prospects in the Republican-controlled Congress. EPA is expected to release its Clean Power Plan regulating utility carbon emissions later this summer, and the Supreme Court will hear arguments on a hugely important FERC demand response order. In early June the EDGE Advisory editors spoke with Katherine Hamilton and Jeffrey Cramer of 38 North Solutions to get an update on policy developments in Washington and the states.

EDGE: The Senate Energy and Natural

in 2005 and EISA in 2007 modified Sec-

think we are going to see some overlap,

Resources Committee is working on major

tion 111(d) of PURPA to include states

including potentially PURPA tweaks, in-

proposed energy legislation, with dozens of

“must consider” language.

The “must

novation programs, and energy efficien-

individual bills under consideration. What

consider” list may be expanded to include

cy provisions. The House will also try to

bills are you following and how do you see

distributed generation, energy storage,

finish up and pass their bill before the

prospects generally?

and other new technologies. Chairman

August recess. A bill can pass the House,

Murkowski has said we have to deal with

of course, without bipartisan consensus.

KH: We are tracking a total of 112 bills

distributed generation in some way so

If final bills make it through both Cham-

that have been introduced in Senate En-

perhaps there is a path forward for these

bers, there will still need to be a confer-

ergy and Natural Resources. The Com-

distributed generation ideas.

ence to resolve differences before send-

mittee leadership wants this to be a very

ing a final package to the President.

bipartisan process. They have held hear-

EDGE: What do you expect for timing on

ings on infrastructure, energy efficiency,

energy legislation on the Hill?

supply, and accountability. Within those

EDGE: There has been a lot of discussion about jurisdictional issues relating to dis-

categories, we have seen proposals for

KH: The Senate will probably try to pull

tributed energy resources, particularly the

distributed generation and a national en-

everything together before the August

division of authority between states and the

ergy storage goal. It looks like provisions

recess if it looks like they can get floor

FERC. Do you see Congress addressing this

that might have some consensus include

time early in the fall. They are holding


transmission siting, a few infrastructure

four mark-ups in July to determine which

issues, and energy efficiency. There is

bills will make it into the final package.

KH: This is a very important issue. While

strong interest in energy efficiency in

Once a bill gets to the floor, presumably

bulk power policy falls under the Federal

schools and non-profits, as well as smart

in the fall, all bets are off. In an open

Power Act, I don’t see any opening up of

grid, distributed energy and energy stor-

amendment process, we could see “poi-

that legislation. The proposed PURPA

age grant programs. I think it is likely

son pills”—like curbing the EPA’s Clean

amendments can have an impact by

there will be authorization language for

Power Plan—that could stymy passage

asking that states consider distributed

these programs. Some of the DOE Qua-

of a final bill. The House is also consider-

generation in their planning processes.

drennial Energy Review recommenda-

ing energy legislation on a parallel track.

In the end, I think the states are going

tions also have broad agreement. An-

Their bill looks different from the Sen-

to have a greater impact on deployment

other set of proposals that has spurred

ate version and has had a less expansive

of distributed generation resources, re-

debate is around PURPA reform. EPACT

stakeholder and Member process, but I

gardless of Congressional action.


EDGE Finance Advisory Q2 / 2015

EDGE: There is increasing concern regard-

that the extenders package will not only

after the circuit court handed down its

ing the prospects of Congress extending the

be retroactive to January 1, 2015, but

decision, FirstEnergy filed a complaint at

ITC and PTC clean energy tax incentives.

at a minimum go forward to the end of

FERC stating that the decision would im-

Are you seeing scenarios for extenders get-


pact energy and capacity markets for de-

ting passed in this Congress?

mand response and potentially other disEDGE: The Supreme Court has decided that

tribution side resources. Generators are

KH: Keep in mind that there are other

it will review the D.C. Court of Appeals de-

particularly at risk from distributed gen-

tax incentives beyond clean energy that

cision overturning FERC Order 745 on de-

eration resources operating as flexible

expired at the end of 2014 and need to

mand response. What are the implications

capacity in the wholesale markets and

be extended. We believe there will be a

of this case for distributed energy providers?

potentially displacing traditional gener-

push on this front in the early fall. In July,

ating resources. The Supreme Court has

Senate Finance may mark up an extend-

KH: This is shaping up to be a very im-

decided to hear this case in its next ses-

ers bill similar to the EXPIRE Act from

portant case. FERC Order 745 was very

sion, starting in October. If Order 745

2014. We would expect the wind PTC/

narrowly defined: it only applies to de-

is upheld, the markets should continue

ITC to be included in that package, espe-

mand response in the energy market.

to operate as is. If not, there will be a

cially given the level of support from key

The energy market represents about

great deal of upheaval of state demand

Senators in the Midwest and West. Con-

5% of demand response; the rest is in

response programs (many of which are

gress does not want to have to deal with

the capacity market. But the way the

monetized by bidding into the energy

tax issues during an election cycle, so

circuit court decision was written could

market) and potentially in the capacity

perhaps the solar credits set to expire in

be interpreted to include any distribu-

markets as well. This is really a matter

2016 could get some air time during the

tion resource participating in the entire

of sound public policy, but we don’t know

extenders debate. The hope of course is

bulk power market. In fact, immediately

how the Court will go. The Solicitor Gen-


eral has a strong case to make for FERC

plementation plans. I also think we will

are quiet conversations about compli-

and the federal government; we think it

see more focus on regional approaches

ance happening even in the states who

warrants overturn of the circuit court

and guidance on how those can be exe-

are suing the EPA.


cuted. What do you think about the state

Consumer groups, environ-

mental organizations, demand response

implementation planning Jeff?

providers, and several states are all fil-


In talking with the stakeholders I

think the most positive sign is that utili-

ing amicus briefs that should bolster the


case as well.

are considering.

There are a lot of factors the states

ties are actively considering the CPP in

A number of states

their projections and resource planning.

are out on the front lines – staking out

The CPP has jumpstarted the conver-

EDGE: EPA is expected to release its Clean

leadership positions – in preparing state

sation no matter what legal battles lie

Power Plan final rule by August, requiring

implementation plans. Several regional

ahead. I think just by looking at what

states to implement plans to reduce carbon

groups are working together, coalescing

utilities are thinking about, regardless

emissions from power plants. Are you an-

their energy and environment officers to

of what governors are saying in certain

ticipating any significant changes from the

think about what a mass state approach

states, you can see what the plans will

approach taken in the proposed rule issued

and regional approach would look like.

look like and the signs are good for clean

in mid-2014, and what progress are you

This approach is very appealing given the


seeing at the state level on preparing imple-

efficiencies that can be created. These EDGE: Last question: In the past

mentation plans?

few years we’ve seen various batKH: EPA received millions

tle grounds involving opposition

of comments, with input and

or repeal of state RPS’s or efforts

information from many indi-

made in public service commis-

viduals, groups, and compa-

sion proceedings by utilities to

nies. I think those will be taken

impose additional charges. Are

into consideration and some

there any particular states or

tweaks will be made to the final

proceedings that you are looking

rule, although we are hearing

at right now that you see as par-

that the overall goals will not

ticularly interesting?

change. Hopefully, there will be modifications to the “building block”

efforts are creating a de facto market,

JC: I think we are seeing more educated

definitions – the types of actions that will

even in advance of the final Clean Power

stakeholders and more organized groups

be available to states to achieve green-

Plan rule. A number of states are in po-

in support of distributed energy resourc-

house gas reductions. For example, I am

sition to meet their CPP targets based

es in states working together to inter-

hopeful EPA will allow for energy stor-

on current renewable portfolio stan-

vene, whether in rate cases or resource

age and other types of distributed en-

dards and expected coal plant closures.

planning. The move is to be proactive

ergy generation to participate in a more

An important question is how EPA will

rather than reactive. We are seeing new

holistic way rather than be limited to re-

deal with early action credits. Progres-

grassroots efforts such as in Mississippi

ductions on the demand side. Overall, I

sive utilities and developers have really

to allow for net metering and intercon-

think the rule will present an enormous

pushed that concept so EPA may very

nection rules.

economic opportunity for clean energy

well develop a path for early action. If

KH: Yes, I think the Southeast is about to

as well as consumers. EPA may be willing

states are seriously considering the mass

open up and create new markets for so-

to give additional flexibility to genera-

state approach, you’re going to start to

lar and other renewables.

tors and states, but the trend will be to

see things happening very quickly. EDGE: Thanks to both of you. We will look

develop cleaner resources. EPA may recommend alternatives and provide addi-

KH: Senate Majority leader Mitch Mc-

forward to catching up later in the year

tional tools that will be helpful to states

Connell has said point blank states

on these and other energy policy develop-

as they start putting together their im-

should ignore EPA, but we know there



EDGE Finance Advisory Q2 / 2015

GLOBAL TRENDS IN THE DISTRIBUTED ENERGY TRANSITION The worldwide transition towards distributed energy continues to accelerate. A number of recent announcements and developments signal further rapid transformation ahead.

The role for utilities E.ON, Europe’s largest energy utility, is spinning off its conven-

utilities are now considering similar strategies. The dynamic is

tional energy assets. E.ON will be building its business around

taking hold in the U.S. as well, as certain utilities such as NRG

clean energy and distributed generation going forward. Ger-

Energy, Inc. are building their business around renewables and

many has passed the point where renewables are the single

distributed generation, and states such as New York are actively

largest source of electricity generation. E.ON concluded that

moving towards new utility business models focused on distri-

its future business opportunities are in renewables, distributed

bution. Can the stodgy utility sector be agents for change? Mar-

resources, energy efficiency and information services technolo-

ket forces may leave them no choice.

gies. This move is likely to be a harbinger as other European

Mining sector and distributed generation Global mining operations are energy intensive. For example,

in South Africa. In Brazil, the largest single energy consumer is

South Africa’s Department of Minerals and Energy estimates

mining giant Vale, which accounts for around 4% of all energy

that the mining industry uses 6% of all the energy consumed

used in the country.

Switching to distributed generation offers major potential economic benefits for mines, including: „„ Lower aggregate long term fuel and electricity costs for operations and minerals processing. „„ Reduced price volatility as compared to diesel fuel. „„ Greater reliability and/or enhanced grid integration. „„ Reduction in carbon emissions and resulting access to carbon reduction credits and government incentives. „„ Reduced risk of power loss from supply disruptions. A key to unlocking these benefits is finance. Historically mining

stitutions and NGOs such as the Carbon War Room are work-

companies have viewed energy cost as an operating expense,

ing to develop innovative financial mechanisms including third-

and have hesitated to make capital expenditures for long term

party ownership models. Given the upsides, expect to see major

generation. Now, mining executives, international financial in-

developments in this area over the next few years.


The push for carbon pricing gains momentum In the run-up to the global climate change treaty meetings in Paris this December, several developments are pointing to greater prospects than ever for expanded carbon pricing regimes. „„ In a letter on June 1, major European oil companies Shell, BP, Statoil, Eni, Total, and the BG Group advocated before the United Nations Framework Convention on Climate Change that carbon pricing “should be a key element” of an international climate change agreement. These oil companies join other major sectors, including the insurance and securities industries, which are pushing for climate action based largely on economic considerations. „„ China has established a carbon fee and is moving forward with its plan for a national carbon market to be launched in mid-2016. South Africa will make lawmakers vote on a carbon tax in 2016, while Chile has its own scheduled for 2017. World Bank officials have described the “growing inevitability” of carbon pricing at recent events, and estimate that current emissions trading market volume at $34 billion. „„ Finally, we all saw the announcement by Pope Francis two weeks ago pressing the moral case for climate action. Will these developments help reach a tipping point for international action on carbon in Paris? All signs are for continued momentum in that direction, and further consequent opportunities in the distributed energy sector.


EDGE Finance Advisory Q2 / 2015

Green Tea Coalition Pushing Renewables In The Southeast In an era that has been defined by partisanship, renewable energy advocates have recently proven that going green is one issue that can defy traditional party lines. What some are calling the “Green Tea Coalition” is gaining a seat at the table and forcing action in places where, until recently, the influence of utilities had blocked efforts to change the status quo. The Green Tea Coalition is comprised

party solar ownership in the state. Florida

main states in recent years, including

of the somewhat strange bedfellows

is not far behind Georgia in authorizing

New York, Massachusetts, North Caro-

of conservatives, often, but not always

third-party ownership, and the potential

lina and California. However, as renew-

with links to the Tea Party Patriots, and

impact there could be even greater.

able portfolio standards (RPS) goals are

environmentalists. The movement has

met and incentive programs sunset or

been active in the Southeast, especially

According to Scott Thomasson of Vote

become less lucrative in some of the

Georgia where noted Tea Party leader

Solar, Florida’s grassroots efforts are

more traditional solar states, project de-

Debbie Dooley founded the non-profit

“the real deal” and “the best and most

velopers will necessarily be casting their

Conservatives for Energy Freedom. Tea

comprehensive” he has seen anywhere

gazes toward parts of the map that are

Party members of the Coalition cooper-

in the nation. Mike Anthiel of the Flor-

typically colored in red as freedom of

ate and sometimes work in concert with

ida Solar Energy Industry Association

energy choice becomes a rallying cry for

traditional clean energy advocates. One

(FlaSEIA) agrees, noting that Green Tea

the right.

example is the joint efforts of the Sierra

efforts have directly led to a ballot initia-

Club and Tea Party Patriots to lobby the

tive process related to third-party own-

Other states where Green Tea-type co-

Georgia Public Service Commission for

ership gaining steam there. Mr. Anthiel

alitions could make an impact in the fu-

rule changes supporting solar energy.

believes the Coalition’s efforts to reverse

ture include the Carolinas, where efforts

laws on the books under which solar

have already been seen, and Louisiana, as

While the members of the coalition co-

equipment is taxed as personal property

well as Midwestern states including Min-

operate, their rhetoric varies.


could be equally, if not more, impactful.

nesota, Michigan and Kansas.

even casual observers can walk through

Solar development has focused on a few

common Green talking points around climate change - management of resources and environmental impact - the conservative approach focusing on personal liberty and security. For example, Georgians for Solar Freedom speaks about renewable energy in the context of national security, free market competition and technological innovation. The impact of conservative support has been most visible in Georgia. Georgians for Solar Freedom recently worked with members of the Green Tea Coalition to pass the Solar Power Free-Market Financing Act of 2015, which allowed for third-


Report from the States Distributed energy’s recent ascendance underscores a bevy of state policy and regulatory battles with significant implications for the nascent industry. Key states that have supported the growth of solar, California and Arizona in particular, are currently debating changes that could threaten deployments, particularly for rooftop residential and commercial installations. Other states are moving ahead with legislation opening up markets. Our friend Robert Rains, an Energy Analyst at Washington Analysis LLC, contributed to the following report:

Northeast Connecticut Last month, the Connecticut State Senate approved H.B. 6838, which will expand the state’s residential solar program and its energy goals, resulting in 300 megawatts of solar installations on over 40,000 homes. The new residential solar incentive model was proposed by Gov. Dannel Malloy in February as a way to attract more than $1 billion in private investment in solar PV in the state.

Massachusetts On January 6, 2015, the administration of former Governor Deval Patrick solidified Massachusetts as a leader in the residential solar energy market by announcing its final design for the Mass Solar Loan Program. Commencing Spring 2015, the $30 million residential loan program is helping homeowners finance the placement of solar panels on their homes by working with banks and credit unions to lower loan rates and encouraging lower income homeowners and/or those with lower credit scores to consider loans. This program is an outgrowth of an earlier study, which determined homeowners’ overall net benefits to be ten times greater with direct solar ownership (with loans) than thirdparty ownership. Currently, according to SunRun, almost 60% of homeowners who have gone solar chose a solar lease, rather than buying the panels. In the solar lease model, SunRun and competitors typically provide the homeowner with the use of the solar system and offer a Power Purchase Agreement (PPA), which locks in a long-term rate for electricity generated by the system. Additionally, these developer entities assist with residential installations for little customer money down, and then service the system over its useful life, eliminating a large part of the hassle to the homeowner. However, in exchange, the homeowner signs over to the developer their Solar Renewable Energy Credits (SRECs) and other possible tax incentives (e.g. the Investment Tax Credit or ITC) or rebates. In addition, SunRun, as the owner of the solar facility, benefits from net metering policies instead of the customer. This new solar loan program may change the paradigm, giving solar customers greater control over their panels and the ability to directly monetize credits and other ownership


EDGE Finance Advisory Q2 / 2015

incentives. The goals of this program include increasing accessibility for all parties involved (i.e. customers, lenders, and installers), creating an affordable solution that enables middleincome homeowner participation, assisting smaller installers in securing financing for their customers, and increasing competition in the residential solar market. If the program is successful, a trend toward localization of solar loans could be expected to emerge in other pioneering states, thus challenging the status quo of PPAs and solar leases. Legislation to codify indications of support for 1,600 megawatts of solar by 2020 from Massachusetts Energy and Environment Secretary Matt Beaton remains unlikely. Instead, we expect the Democratic-controlled legislature to advance another measure to slightly raise the state’s net metering participation cap, a small positive for rooftop firms already in the state.

New Hampshire Earlier this year, the New Hampshire House of Representatives Science, Technology and Energy Committee voted 18-2 to not recommend a bill (S.B. 117) to the full House that would have removed barriers to utility ownership of rooftop solar. The action effectively kills the bill, SB 117, which passed the Senate in March. According to the publication Utility Dive the Committee chose to postpone a decision on allowing power distribution companies to own rooftop solar because Eversource Energy is currently completing divesture of generating facilities as required of New Hampshire utilities under deregulation.

New York The Reforming Energy Vision (REV) docket underway in the New York Public Service Commission (PSC) forecasts the gradual creation of a retail-side distributed resources market with opportunities for solar, wind, and energy storage. For now, the proposal excludes Con Edison and National Grid from ownership of these resources, but we expect that to be modified before implementation begins sometime in late-2016 or later. A cost benefit analysis from the PSC is expected to be released in early-June. Implementation plans by the state’s electric utilities are due December 15, but the build out for REV will likely stretch beyond 2017.

Vermont Last month, the Vermont legislature created the state’s first renewable energy standards for electric utilities. The legislature passed a renewable portfolio standard (H.B. 40) that sets requirements for generating more energy from renewable sources, including community-scale renewables. In particular, it requires utilities to get 55% of their electricity from renewables by 2017 and 75% by 2032. The bill also created an innovative program that requires utilities to achieve reductions in energy use through efficiency measures and other programs. The Vermont House of Representatives passed H.B. 40 on March 10, and the Senate approved an amended version on May 15. Governor Peter Shumlin (D) signed the bill on June 11th.


Southeast Florida Historically, Florida has been known as a difficult state for solar policy and we see little to change this perception in the near term. The five-member Public Service Commission (PSC) is currently accepting comments related to “enhancing development” of solar energy until June 23, 2015, forecasting a long-awaited PSC workshop for sometime in July 2015. The workshop is likely to lay the groundwork for a reduction in solar benefits that should be sought by Florida Power and Light as part of its next rate case. PSC approval is likely, despite some expected backlash from ratepayers. Florida solar groups have gathered enough signatures to start the process of amending the state’s constitution by referendum in 2016 to allow third-party power purchasing agreements (PPAs) to unleash rooftop solar firms upon the state. Verification by the Florida Supreme Court for this initiative is likely by October and supporters of this amendment will then have to get roughly 600,000 more signatures on file by February 1, 2016 in order to be included on the ballot. It remains unclear if this initiative will be successful as Florida Power and Light will likely mount a formidable campaign against it.

Georgia Despite lacking strong policy incentives such as a Renewable Portfolio Standard (RPS), Georgia ranked 7th among the U.S. states in 2013 in new solar installations, attracting $326.2 million in private investment in the sector, a 1,025 percent increase over 2012, the largest gain of any state in that year. In lieu of mandatory standards such as an RPS, Georgia has relied largely on voluntary clean energy programs, which are expected to bring nearly 900 MW in renewables online by the end of 2016. Solar markets in Georgia appear poised for additional growth following recent legislative activity. On March 27, the Georgia legislature passed the Solar Power Free-Market Financing Act of 2015. The new law opens up third-party ownership of leased rooftop solar projects up to a maximum of 10 kW generation capacity. In addition, the bill permits third-party ownership of commercial solar energy installations, up to a limit of 125 percent of the customer’s actual or expected annual peak energy demand. Georgia Governor Nathan Deal (R) signed the bill in May. Net metering policy reform to support greater solar adoption seems unlikely near term, but commercial and utility scale opportunities will likely continue. The state’s largest utility, Southern Company subsidiary Georgia Power Co., has been recruiting private sector participants through its Advanced Solar Initiative. Additionally, the utility is working with the U.S. Army Energy Initiatives Task Force to build, own, and operate 90 MW of solar power across three Army bases, which will, when operational, cover an estimated 18% of the energy used by the Army in Georgia. Another potential opportunity is presented by power sales in out-of-state markets, with a study by Arizona State University finding Georgia to be one of the top three states that could benefit from cross-border sales. We note that Georgia Power announced the purchase of two solar projects totaling 99 MW of solar in late-February from Tradewind Energy, Inc.


EDGE Finance Advisory Q2 / 2015

North Carolina The North Carolina Utilities Commission (the Commission) recently entered an order in its biennial rate proceeding rejecting requests by Duke Energy and other utilities seeking to alter standard contract terms that are vitally important to solar developers and investors in North Carolina. North Carolina has been a booming market for solar over the last few years, currently ranking third in the nation for energy investment. In February of 2014, Duke Energy issued an RFP, which ultimately committed the utility to purchase $500 million of independent distributed energy in North Carolina. Much of the past success (and future prospects for investment) are founded on the Commission’s standardize contract terms and rates for power purchase agreements, which have provided certainty of economic returns over 15 year time horizons. But shortly after issuing its 2014 RFP, Duke and other NC utilities sought Commission rulings that would reduce the standard PPA term from 15 down to 10 years, and reduce the eligibility from the current 5 megawatt project ceiling down to 100 kilowatts. Fortunately for solar developers and investors, the Commission rejected Duke’s arguments, finding that the current standard contact term of 15 years and availability to projects up to 5 MW are well supported and appropriate. Like Florida, North Carolina prohibits third-party ownership which has prevented rooftop firms from meaningfully entering the state, but commercial- and utility-scale solar opportunities have abounded thanks to the 35% (and $2.5 million maximum) state tax credit that expires YE 2016. While this credit is scheduled to be eliminated in 2017, projects 65 megawatts (MW) and smaller that are 80% complete, and 65 MW+ that are 50% complete, may also qualify. Gov. Pat McCrory (R) has indicated he will not support any additional extensions for this credit and the legislature is unlikely to pass another extension. A proposal in the legislature (HB 332) would alter the state’s “standard offer” law from a 5 MW over 15 years “standard offer” contract to just 100 kilowatts, most likely significantly reducing solar deployments for the Tar Heel state because of its prohibition of third-party ownership. A separate bill would establish third-party ownership, but passage is uncertain. Furthermore, HB 332 would also freeze the state’s renewable electricity standards rather than fully build out to 12.5% by 2021. The legislature is in session, most likely, until August.

South Carolina Despite average sunshine hours ranging from 173 in winter months to 291 during the summer; in 2014, South Carolina only installed 1 megawatt (MW) of solar electric capacity, ranking it 33rd nationally. However, South Carolina did pass meaningful legislation in 2014, the Distributed Energy Resources Act, which called for utilities to establish distributed energy resources programs, enabled third-party leasing, and updated the state’s net metering program. This enactment signals that legislators in the state’s capital of Columbia are ready to bring the state more in step with the solar movement, and open opportunities for investment and development.


Earlier this year, the South Carolina Public Services Commission approved a settlement agreement between utilities and clean energy groups, which ensures that residential and commercial customers will receive full retail credit for over-generation on a first-come, first-serve basis up to 2% of the utility’s peak capacity for the last five years. The deal is being heralded as a critical step toward implementing the Distributed Energy Resources Act. Duke Energy Carolinas and South Carolina Electric & Gas, which both supported the deal, have committed millions of dollars to install residential and commercial solar in the state.

West Virginia West Virginia Governor Earl Ray Tomblin recently signed into law a controversial net metering bill (H.B. 2201) that limits net metering from solar power generation to 3% of a utility’s aggregate customer peak demand, with 0.5% coming from residential customers. The bill also calls for the Public Service Commission to study the state’s net energy metering policy rules to ensure that net metering does not cause a cost shift from solar owners to non-solar owners.

Virginia While Virginia has not historically offered robust clean energy incentives and programs, Governor Terry McAuliffe appears determined to reverse the trend. On January 16, 2015, the Governor’s office released a request for information (RFI) seeking data on potential public-private partnerships (P3s) for solar energy development in and around state owned property. The RFI is directed towards experienced individuals, firms, teams, and organizations that can help in development, financing, design, or building of P3 solar projects above 100kW. The recent actions by Dominion Power and Governor McAuliffe support the Governor’s statement that “Virginia is serious about enhancing its solar energy industry.” Among the challenges to development is Virginia’s voluntary Renewable Portfolio Standard (RPS), as opposed to the mandatory structure successfully adopted by twenty-nine states. Another obstacle noted is the lack of state tax incentives for private developers.

Midwest Illinois The Illinois legislature recently introduced H.B. 2607 and companion bill S.B. 1485, which would strengthen the state’s current renewable portfolio standard and remove caps on energy efficiency investments. The bill would increase energy efficiency standards from 13% to 20% by 2025 and renewable energy standards from 25% to 35% by 2030. The bills also authorize the Illinois Environmental Protection Agency (IEPA) to establish a program where the agency could sell carbon allowances at an auction and invest the proceeds, primarily in energy efficiency and renewables.


EDGE Finance Advisory Q2 / 2015

Michigan In April, Michigan Gov. Rick Snyder (R) laid out a broad energy strategy to increase renewable energy generation and energy efficiency in the state. To help implement the plan and develop the required energy policies and programs, the Michigan Agency of Energy was created and opened last month. Michigan has a current target of 10 percent renewable energy generation by 2022. The governor’s plan calls for retiring many of the state’s aging coal-fired power plants to reduce the state’s reliance on coal and to help the state be ready to adapt to energy challenges in the coming years.

West Arizona In 2013, the Arizona Public Service (APS) sought to impose major charges on distributed generation customers, but was largely rebuffed by the Arizona Corporation Commission (ACC). APS requested a monthly charge for net-metering customers of $8 per kilowatt of installed capacity for grid connectivity, a charge that could have exceeded $50 monthly on average. A compromise was approved by the ACC, authorizing a “connection fee” of $0.70 per kilowatt of installed capacity per month for net-metered customers, about $5 a month based on average usage. This result was generally viewed as averting a major threat to distributed generation deployment in the APS service territory. In February 2015, however, Salt River Project (SRP), the retail electric utility for Phoenix, approved a pricing plan that adds fee of about $50 per month to all leased and owned solar systems through a higher fixed service charge and demand charges. SRP claims the new fees are needed to ensure solar customers pay their fair share for their use of the electrical grid, and to support maintenance and upgrades on the network. According to Credit Suisse, the $50 per month charge makes the economics of solar in SRP’s area “effectively non-viable.” In response, SolarCity filed a lawsuit in federal court in Arizona, asking the court to stop SRP’s allegedly anti-competitive behavior. SolarCity says that SRP has “sabotaged the ability of Arizona consumers to make this choice if they happen to live in SRP territory. We can already see the intended effects: After the effective date of SRP’s new plan (December 8 of last year), applications for rooftop solar in SRP territory fell by 96%.” SolarCity contends that the fee would jeopardize the more than 9,000 solar jobs in Arizona. As an alternate strategy, in mid-2014 APS sought regulatory approval of its proposal to install solar panels at no cost to the homeowners. The program, called “AZ Sun DG” would install 3,000 residential 4-8kW solar systems. APS would effectively be leasing consumers’ rooftops for a $30 a month savings on their bill. In late December, the ACC voted to approve APS’s request, although with certain restrictions and conditions. The ACC approved a similar type of program proposed by Tucson


Electric Power Company. With these decisions, Arizona utilities may increasingly seek to act as active participants in the solar and distributed generation markets. Despite the growth in solar for the state, we view Arizona as the most challenging market for rooftop solar providers in 2015 and beyond. First, implementation of a statewide property tax for leased rooftop systems, the overwhelming consumer preference in Arizona, remains likely this October and will add $12-$20 per month for residential and commercial systems. Second, the five-member Arizona Corporation Commission will likely approve higher fixed fees for new rooftop solar customers YE 2015. If approved, the Arizona Public Service would raise fixed fees to $3 per kilowatt (kW) per month (from $0.70 per kW), which would likely chill residential rooftop adoptions ahead of the next rate case to be decided in 2016. Finally, while SolarCity is challenging both the property tax and the $50 monthly net metering fixed fees that were recently adopted by municipality SRP, the outlook for these cases remains uncertain

California California Public Utility Commissioner Mike Florio recently proposed a collapse of the state’s current four-tier retail electric rates into 3 tiers and setting a 77% difference between the highest electric consumption and the lowest electric consumption, a positive for rooftop solar firms to be implemented in late-2015 to 2018. Compared to the proposed decision by California Public Utility Commission (CPUC) Administrative Law Judges (ALJ) issued in April, the proposal is favorable. Furthermore, under Florio’s proposal, California would establish a baseline retail rate, a credit for the first 300 kilowatt-hours, and then an excessive use charge. Florio’s proposal also contains language rejecting the implementation of fixed charges for “cost shift” that would have benefitted California’s “big three” investor-owned utilities. Finally, the state would also move to default time of use (TOU) rates. In contrast, the ALJ proposal released in April would collapse the state’s four tiers into just two by 2019 with a difference between these remaining rates of just 20% due to rate increases for the lower tiers. Fixed fees would be implemented in 2019 (up to $10) and we would expect an even higher price due to legislative action before the transition is completed. During the transition, there would be a minimum bill set at $10 per month. A third proposal from CPUC president Michael Picker seems likely that would incorporate elements of both proposals, still a potential headwind for rooftop solar because we believe fixed fees are likely after the transition. Instructive in this outlook is Picker’s previous work at the Sacramento Municipal Utility District, where solar fixed fees are $13 per month and rising to $20 in 2017. A vote on reforming the state’s tiered retail electric rates could occur as early as June 26. Work continues at the CPUC concerning a new net metering tariff that we expect to be voted on by YE 2015 for implementation by July 2017, or when the state reaches 5,200 megawatts (MW) of rooftop solar, as mandated by law. A proposal in Q3 is likely. Some reduction in benefits enjoyed by current customers is likely, as indicated by the CPUC decision to grandfather current net metering benefits for customers that adopt ahead of the new tariff for 20 years.


EDGE Finance Advisory Q2 / 2015

Finally, Democratic Governor Jerry Brown’s announcement of a goal of a 50% renewable electricity portfolio standard (RPS) for the state by 2030, a positive for utility and commercial scale firms that will require legislation in order to apply to the “big three” investor-owned-utilities. Measures supporting this goal have advanced in both chambers of the state legislature and passage of something before adjournment in September seems likely. Absent a specific carve out for rooftop solar, this policy does little to rebut a decline in net metering incentives that we maintain is likely by the CPUC. The CPUC has authority to raise the RPS mandate to 50% on its own, but it would only apply to state municipalities and cooperatives.

Colorado In Colorado, deliberations continue over the value of rooftop solar that was severed from a proceeding concerning Xcel’s compliance with the state’s renewable electricity mandate. Comments were due to the three-member Public Utility Commission (PUC) in late-May and we expect a decision by the PUC by YE 2015. Our base case is the implementation of a minimum bill for all ratepayers that would likely require a 6-12 month rulemaking process before being finalized.

Hawaii Gov. David Ige (D) recently signed a bill passed by the Democratic-led Hawaiian legislature before adjournment in May which will transition the state to 100% renewable electricity by 2045. The state’s high retail electric rates ($0.31 per kilowatt-hour) have pushed many customers towards rooftop solar and the trend is sure to increase as the new legislation is implemented. An additional bill (H.B. 1509) if passed into law, would make Hawaii’s state university system the first in the U.S. to have 100 percent renewable energy as a goal, including generating all its own power by 2035.

Nevada Nevada’s sizzling solar market is likely to face headwinds when a new net metering policy is adopted by YE 2015 by the Public Utility Commission (PUC). A bill to temporarily extend the state’s current net metering tariff for part of 2015 was recently passed, allowing 80 megawatts of additional residential rooftop solar while the PUC develops the new tariff. Coloring this proceeding will likely be NV Energy’s forthcoming “cost of service” study for solar expected by the PUC later this summer. The makeup of the three-member PUC will matter greatly to this proceeding. Specifically, Commissioner David Boyle may support the creation of a separate “class” of ratepayers for rooftop solar that would likely lead to the implementation of fixed fees or else a minimum bill. Meanwhile, Commissioner Rebecca Wagner will likely depart from the PUC this August and her replacement is unknown. Wagner is widely considered to be the strongest advocate on the PUC for solar and her replacement will be closely watched by solar advocates.


New Mexico While it is tempting for solar advocates to cheer the rejection of proposed interconnection fees ($21-36 per month) for solar customers in PNM Resources’ last rate case by the Public Regulation Commission (PRC), we note that PNM Resources is expected to re-file a proposal by September 2015 and we expect it to make modifications to the interconnection fees proposal that should pass muster with the PRC in a decision sometime in late-Q1 or early Q2 2016. The state’s 10% solar tax credit expires in 2017 and we expect an extension to be a topic of debate for state lawmakers when they return in January 2016. Although Republican Gov. Susana Martinez vetoed a measure that would have allowed New Mexico ratepayers leasing rooftop solar to qualify for the 10% state tax credit on the basis of “unintended consequences,” we think that a compromise to extend the state tax credit is likely.

Washington Earlier this year, the Washington State Senate approved S.B. 5735 which provides large utilities alternative ways to comply with the state’s renewable energy mandate. S.B. 5735 allows utilities to use any resource that reduces carbon to meet the mandate, including electric-vehicle chargers, hydropower and battery storage technologies. Under the current law, utilities are required to get 15% of their power from wind, solar, geothermal, and certain woody biomass by 2020. The bill is currently working its way through state House committees.


EDGE Finance Advisory Q2 / 2015

About the authors EDGE Advisory is a publication of the Energy Finance Practice of Sullivan & Worcester, LLP. It is edited by Jim Wrathall and Elias Hinckley. Contributing authors are listed below. Special thanks and acknowledgments for additional contributions from Rob Rains of Washington Analysis, LLC; David Sweet of the World Alliance for Decentralized Energy; and Morgan Gerard of S&W.

In addition to heading S&W’s Energy Finance Practice, Elias Hinckley has been the leader of the alternative energy practice for one of the world’s largest professional services firms as well as the clean energy and cleantech leader for two AmLaw 100 law firms. He also is a professor of international energy policy, a regular contributor to several energy forums and frequent speaker on energy policy and finance.

Jim Wrathall, co-leader of S&W’s Energy Finance Practice, represents investors, developers and non-governmental organizations in energy finance and acquisition transactions and policy matters. Prior to joining S&W he had over two decades of experience with AmLaw 20 law firms, including 11 years as a partner with WilmerHale LLP. He served as Senior Counsel with the U.S. Senate Committee on Environment and Public Works from 2007 through 2011, handling clean energy and climate change legislation and oversight.

Merrill Kramer represents some of the most active and innovative players in the energy industry in project development, project finance, energy regulation, litigation and enforcement matters. He handles complex litigation and enforcement matters before the Federal Energy Regulatory Commission, state regulatory agencies and the courts.

Tricia Mundy represents public and private companies in a broad range of general business and finance matters, including energy financing and acquisition matters. She specializes in solar development and acquisition transactions.

Jeffrey Karp advises clients in renewable energy and energy efficiency matters, including infrastructure development. He also represents clients in litigating and resolving disputes under a variety of federal and state laws.


A co-founder of 38 North Solutions, Katherine Hamilton cut her teeth designing electric grids at a utility, performed energy and water efficiency research at a national lab, then used her technology expertise working on clean energy policy and leading trade associations that could move the needle on bioenergy, smart grid, storage, and demand response. She now spends most of her time shaping federal and state energy, environment, and tax policies, as well as engaging in regional energy markets.

Also a co-founder of 38 North Solutions, Jeff Cramer has spent the last five years working as a public policy analyst and advocate on behalf of a variety of leading businesses and non profits across the clean energy value chain. Previously, Jeff worked in the finance sector developing expert networks of thought leaders in emerging technologies for institutional investors. He now spends a great deal of time working on state policy for distributed energy technologies.

Josh Sturtevant represents clients, including early stage companies and funds, in energy project development and project finance transactions, policy and regulatory matters, and corporate development matters. He previously served as lead inside legal counsel and as a member of the management team with Distributed Sun, a privately held Washington, D.C.–based renewable energy developer, investor, owner and operator. At Distributed Sun, Josh managed diligence and transaction closings and advised on corporate development activities.

Van Hilderbrand Jr. 's practice focuses on energy finance projects, regulatory compliance, environmental, and permitting matters. Mr. Hilderbrand represents a diverse set of clients across energy sectors with project development and project finance transactions.

Natalie Lederman represents public and private companies in a broad range of general business and finance matters, including corporate formation, mergers and acquisitions, public and private offerings, and securities law compliance.


EDGE Finance Advisory Q2 / 2015

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EDGE Distributed Energy Advisory Q2 2015